When it comes to Michigan political campaign financing, violations of the law seem to be unevenly applied by Secretary of State Jocelyn Benson. If you’re a Republican, or connected to conservative or GOP-related campaigns, you’re likely to get the hammer for any infraction. If you’re a Democrat or a ‘progressive’ campaign to get on the ballot, not so much.
The only hope for correction of this situation appears to lie with Attorney General Dana Nessel, like Benson a Democrat. Plus, Nessel has a chance to do a lot more than deal with Benson’s double standards.
Nessel has a chance to crack down on a new scheme of hiding the true identity of donors to a ballot question committee that made its appearance in Michigan in the 2022 election cycle. It’s a perfect opportunity for a Democratic Attorney General whose party has railed against the use of ‘dark money’ to win elections. Nessel could strike a huge blow right now to cripple the practice of ‘dark money.’ The ball is in her court. She can make something happen if she wants to, but she’s already waited 15 months without making a move.
What is this ‘new scheme,” anyway?
IT INVOLVES USING LIMITED LIABILITY COMPANIES (LLCs) TO REPLACE “501 C 4s” AS THE DARK MONEY VEHICLE OF CHOICE IN MICHIGAN.
Under the new scheme, someone creates on paper an LLC (limited liability company). Donors who want to financially support a Ballot Question Committee (BQC), but do not want their names disclosed on a campaign finance report simply write a check to this LLC. Then that check and others is deposited in the LLC’s bank account The LLC, in turn, writes a check to the BQC. It shows up on the BQC’s campaign finance report as a contribution received from the LLC, not the true donor.
In five simple steps, anyone can be off and running their own political money laundering operation. Here’s how:
Step 1: Choose an LLC name or acronym and register it with the Michigan Department of Licensing and Regulatory Affairs (LARA).
Step 2: Choose a registered agent.
Step 3: Prepare an LLC operating agreement.
Step 4: File with LARA’s Bureau of Corporations, Securities and Commercial Licensing, your LLC’s articles of organization.
Step 5: Get an employer ID number (EIN) from the IRS and open a checking account at a bank or other financial institution.
Anyone can retain a law firm to do all this, or he or she can do this on the cheap by obtaining from LEGALZOOM their free LLC package of forms and documents to file with a payment of state filing fees to put their LLC in operation. LEGALZOOM offers a premium package for $299 plus the payment of state filing fees and, as with TURBOTAX, that fee includes consultation with a LEGALZOOM attorney.
Grosse Pointe Park businesswoman Shery Cotton, co-founder of the insurance company Meridian Health Plan, had a law firm create a limited liability company for her called RFFW. That acronym likely stands for Reproductive Freedom For Women (RFFW), but an acronym was sufficient.
RFFW, the LLC, was filed with the State of Michigan on July 14, 2022. RFFW sent $1 million to Reproductive Freedom for All (RFFA), the ballot question committee registered with the Bureau of Elections supporting Proposal 3. The $1 million was reported by RFFA as a direct contribution coming from RFFW.
On their November 8, 2022, general election ballots, voters approved Proposal 3, enshrining abortion rights in the Michigan Constitution.
During the campaign, after $1 million was disclosed coming from an LLC with an acronym for its name, a campaign finance complaint was filed with the Bureau of Elections. Eight months later, RFFW agreed to sign a conciliation agreement with the Secretary of State’s office revealing the source of the mystery money. Shery Cotton was identified as the true donor, giving the $1 million to RFFW that was then contributed to RFFA.
The conciliation agreement required RFFW to file with the Bureau of Elections a Statement of Organization registering RFFW, itself, as a ballot question committee. RFFW was also required on its campaign finance report to disclose that Shery Cotton, on July 18, 2022, made a $1 million contribution to RFFW. The campaign finance report discloses that RFFW contributed $1 million to the ballot question committee, Reproductive Freedom for All (RFFA).
The Bureau of Elections assessed RFFW only $1,300 in late filing fees accumulated for their late statement of organization filing and all their late campaign finance statements. Was a fine of $1 million for laundering $1 million through RFFW to RFFA ever on the table?
Was this a sweet-heart deal? You decide.
Now let’s look at another case. The Bureau of Elections made a determination back in October, 2021, that there was reason to believe that Michigan Citizens for Fiscal Responsibility (MCFR), a 501 C 4 organization, violated the Michigan Campaign Finance Act (MCFA) for laundering $1.78 million from 44 contributors through MCFR and contributing that same amount to Unlock Michigan, a ballot question committee that was organized to repeal, through a statutory initiative, the 1945 Gubernatorial Emergency Powers Act during the height of the 2020-2021 Covid-19 pandemic.
Unlock Michigan reported receiving $1.78 million made in 10 separate contributions over 2020 coming from MCFR. The conciliation agreement that was offered to MCFR would have required MCFR to pay $1.78 million to the State of Michigan for their illegal contributions to Unlock Michigan. Unsurprisingly, MCFR rejected this offer.
Another 501 C 4 organization, Michigan! My Michigan! (MMM), also had a campaign finance complaint filed against it in April, 2021. This complaint alleged that MMM laundered $550,000 from 34 contributors made in five separate contributions to Unlock Michigan. After finding there was reason to believe a violation of the MCFA occurred, MMM was offered a conciliation agreement which would have required MMM to pay $550,000 to the State of Michigan, an amount equal to their illegal contributions to Unlock Michigan. MMM rejected this offer.
Because MCFR and MMM both refused to sign conciliation agreements and pay fines equal to the amount of their illegal contributions, the Secretary of State on June 3, 2022, made criminal referrals of both organizations to Attorney General Dana Nessel. It has been 15 months since those criminal referrals were made to the Attorney General.
At this stage, Michigan Citizens for Fiscal Responsibility and each of its 44 contributors whose names were redacted on the 2020 IRS Form 990 could all be charged with a criminal conspiracy, a five-year felony to violate Section 41 (3) of the MCFA. So, too, could Michigan! My Michigan and each of its 34 contributors whose names were also redacted on their 2020 IRS Form 990 be charged. This section of the law prohibits contributions from being made by a person in the name of another. Without a conspiracy charge, however, a violation of Section 41 (3) is only a misdemeanor that is punishable by a fine of no more than $10,000.
Criminal conspiracy is where two or more persons agree to do a legal act in an illegal manner. It was the basis for the criminal prosecution of aides to Congressman Thad McCotter (R-Livonia), who in 2012 illegally photocopied signatures from McCotter’s 2010 nominating petitions onto McCotter’s 2012 nominating petitions. Then-Secretary of State Ruth Johnson, like McCotter a Republican (Johnson beat Benson for SoS in the 2010 election), rejected the fraudulent petitions and issued the ‘death sentence’ for an incumbent Congressman — she did not allow McCotter’s name to appear on the August 2012 primary ballot, effectively ending his political career. A unanimous Michigan Supreme Court in People v Seewald (2016) upheld the criminal conspiracy charges.
At any time between October 2021, when the Bureau of Elections made the determination that there was reason to believe a violation of the MCFA occurred, and June 3, 2022, when the criminal referral was made to the Attorney General, did Secretary of State Jocelyn Benson’s Department ever offer MCFR and MMM a similar settlement that they reached with RFFW? No. Nothing in the rejected conciliation agreements suggests a RFFW-like offer was on the table.
Retired attorney and campaign finance expert Bob LaBrant argues that Attorney General Nessel should use the criminal referral made to her and go back to MCFR and MMM and offer them the same settlement the Secretary of State offered to RFFW:
1. Register itself as a ballot question committee.
2. Disclose all the names addresses, dates, and amounts of their mystery contributors.
3. Pay all late filing fees for their statement of organization and all the required campaign finance statements.
That’s the carrot.
If that generous settlement offer is refused, her office could then use the stick, says LaBrant.
Nessel and her OAG could either bring felony criminal conspiracy charges or misdemeanor charges for violation of Section 41 (3) of the MCFA against MCFR and MMM and each of their collective 78 mystery contributors, which are most likely major companies and associations in Michigan whose lobbyists could not say “No” to then-state Senate Majority Leader (Republican Mike Shirkey) but wanted to hide their funding of Unlock Michigan from the governor.
Obviously, a criminal conspiracy trial with as many as 80 defendants would make the upcoming Trump Fulton County, Georgia, RICO trial with 19 defendants look like child’s play.
The most important outcome of the criminal referral to the Attorney General should be disclosure, transparency, and accountability.
If the Attorney General, through a court ordered investigative subpoena, obtains from MCFR and MMM a list of their 2020 contributors by name, address, date, and amount from an unredacted 2020 IRS Form 990 or bank records, the public interest would be served even without criminal prosecution.
The Attorney General can publish the results of her investigation, listing the source of the dark money made to those two 501 C 4 organizations. Shareholders and the company’s board of directors and association members and the association’s board of directors would be armed with information from that report to hold their management and staff accountable for this money laundering. Those 78 contributors to MCFR and MMM would be historically recorded and metaphorically etched onto a ‘Dark Money Wall of Shame’ along with the political consultants and public officials who concocted this scheme.
LaBrant believes Michigan has tolerated a culture of dark money for too long. The Michigan Campaign Finance Act, when it was enacted in the aftermath of the Watergate scandal in December, 1976, was based on the core principle that public disclosure is the best disinfectant.
It’s difficult to contend that the public does not deserve to know the source of money in the political process. Only when voters know the true source can they make informed decisions. Hiding the true identities of donors from the public, using vehicles like 501 C’s or LLC’s, should end. But has there been any talk that dark money reform should be on the agenda for legislative action this session in time for the 2024 elections?